Northwestern Events Calendar

Mar
9
2020

Matthew Notowidigdo (IPR/Econ) - The Economic Consequences of Bankruptcy Reform

When: Monday, March 9, 2020
12:00 PM - 1:00 PM CT

Where: Chambers Hall, Ruan Conference Room (lower level), 600 Foster St, Evanston, IL 60208 map it

Audience: Faculty/Staff - Student - Public - Post Docs/Docs - Graduate Students

Contact: Ellen Dunleavy   (847) 491-3395

Group: Institute For Policy Research

Category: Academic, Lectures & Meetings

Description:

"The Economic Consequences of Bankruptcy Reform"

by Matthew Notowidigdo, Associate Professor of Economics and IPR Faculty Fellow

Abstract: A more generous consumer bankruptcy system provides greater insurance against financial risks, but it may also raise the cost of credit to consumers. We study this trade-off using the 2005 Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA), which raised the costs of filing for bankruptcy. We identify the effects of BAPCPA on borrowing costs by exploiting variation in the effects of the reform on bankruptcy risk across credit-score segments. Using a combination of administrative records, credit reports, and proprietary market-research data, we find that the reform reduced bankruptcy filings, and reduced the likelihood that an uninsured hospitalization received bankruptcy relief by 70 percent. BAPCPA led to a decrease in credit card interest rates, with an implied pass-through rate of 60–75 percent. Overall, BAPCPA decreased the gap in offered interest rates between prime and subprime consumers by roughly 10 percent.

This event is part of the 2020 Fay Lomax Cook IPR Colloquium Series.

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